Check our advice monitor on ProFarmer.com for updates to our marketing plan.
Livestock producers: Extend feed coverage... Corn and soymeal futures are signaling at least short-term bottoms are in place on the daily charts. As a result, we advise livestock producers to extend corn-for-feed coverage by one month in the cash market through August. We also advise extending soymeal coverage another two weeks in the cash market through the end of August.
Lawmakers urge Treasury to expedite Section 45Z Clean Fuel Tax Credit regulations... A letter from 14 senators and 36 House members to Treasury Secretary Janet Yellen highlights the urgency for the Treasury Department to issue regulations for the Section 45Z clean fuel production tax credit. This push for timely guidance aligns with the critical deadlines already established for the credit:
· Registration deadline: Producers must have applied for registration by July 15, 2024, to ensure eligibility for the credit starting Jan. 1, 2025.
· Credit effective date: The Section 45Z credit becomes effective for clean fuels produced after Dec. 31, 2024, and before Jan. 1, 2028.
Proposed deadlines from lawmakers:
· September 2024: Issuance of regulations
· November 2024: Final rule publication
This timeline would allow producers to understand the full scope of the credit and its requirements, make informed decisions about investments and production plans. As noted by industry groups, any delays in publishing guidance could “disrupt project timelines, impede capital flows, and threaten existing production and demand for low carbon renewable fuels.”
The Treasury Department and IRS have already provided some initial guidance through Notice 2024-49, which outlines registration requirements and identifies potentially eligible fuels. However, stakeholders are awaiting more comprehensive regulations that will likely address:
· Detailed eligibility criteria for fuels and production processes
· Methods for calculating emissions rates
· Specific documentation and reporting requirements
Bill introduced to extend biodiesel tax credit and prevent ‘double-dipping’... Rep. Mike Carey (R-Ohio) introduced the Biodiesel Tax Credit Extension Act of 2024, which seeks to extend the biodiesel tax credit (40A credit) through 2025. The bill excludes sustainable aviation fuel (SAF) and includes a provision preventing fuels eligible for the forthcoming 45Z Clean Fuel Production Credit from claiming the biodiesel tax credit. Currently, there is no companion legislation in the Senate. This bill is noteworthy for its potential impact on end-of-year and tax extender legislation. The bill has been referred to the House Committee on Ways and Means.
The bill has garnered support from various industry groups, including NATSO (representing travel centers and truck stops), SIGMA (fuel marketers) and the National Association of Convenience Stores (NACS). These organizations commend the bill for its role in promoting renewable fuels, reducing greenhouse gas emissions and supporting the economy.
Biodiesel and renewable diesel can reduce emissions by up to 80% compared to petroleum-based diesel. The credit also helps lower the cost of diesel fuel for truck drivers, which can reduce shipping costs and consumer prices.
Of note: Contacts note with the 45Z credit not available for imported biodiesel, the extension of the tax credit could allow those shipments to qualify.
Rising property insurance costs for farmers and ranchers... Property insurance costs for farmers and ranchers have been increasing, driven by several factors, including climate change, market conditions and rising production expenses.
Climate change and catastrophic events:
· Recent years have seen an increase in severe weather events such as hurricanes, floods and wildfires, which have led to significant insurance claims. This has prompted insurers to raise premiums, increase deductibles and impose more coverage restrictions to maintain profitability.
· The impact of climate change is not limited to traditionally high-risk areas like coastal regions. States such as Iowa, Arkansas and Ohio are also experiencing more frequent and severe weather events, leading to higher insurance costs.
Market conditions:
· The insurance market for agribusiness is facing diminished capacity as many insurers exit the market or reduce the amount of business they are willing to write. This limited supply, coupled with sustained demand, results in higher premiums for the available coverage.
· Insurers are becoming more selective, favoring businesses with strong management, effective risk control programs and good financial health. However, even well-managed farms are seeing rate increases due to the overall market conditions.
Rising production costs:
· Farmers and ranchers are also dealing with rising costs for inputs such as fertilizer, seed and machinery. These increased expenses make it more challenging to absorb higher insurance premiums.
· The overall cost of farming has been rising faster than commodity prices, putting additional financial pressure on farmers and ranchers.
Impact on farmers and ranchers:
· Financial strain: The combination of higher insurance premiums and rising production costs is squeezing profit margins for farmers and ranchers. This financial strain can affect their ability to invest in new technologies or expand their operations.
· Limited coverage options: In areas prone to catastrophic events, farmers may find it difficult to secure affordable insurance coverage. Some may have to rely on high-risk insurance pools or state FAIR plans, which can be more expensive and offer less comprehensive coverage.
· Income stability: Programs like the USDA’s Rainfall Index Pasture, Rangeland, Forage (RI-PRF) Insurance Program help stabilize income by providing payouts during adverse weather conditions. However, these programs are not a complete solution to the broader issue of rising insurance costs.
Says Ruth Gerdes of Auburn Agency Crop Insurance: “The rising cost of production is hitting agricultural producers hard. Coupled with lower commodity prices and higher interest rates that means agriculture is in one of the highest risk environments we’ve experienced in years. Be mindful and purposeful on every purchase to protect your operation. Nothing the government can offer replaces good management.”
Another crop insurance agent says: “Fortunately, crop insurance rates will be dropping because of the price. Also, the ECO subsidy change from 44% to 65%, which was done outside the farm bill, will in my opinion, revolutionize the crop insurance industry. ECO will drop to an estimated $11/acre in Illinois (based on last year’s numbers) for 86% to 95% ECO coverage. Many companies are in the process of creating private products that will allow the farmer to have the greater of 86% to 95% individual coverage and 86% to 95% county-based ECO coverage, thus allowing it to be a bankable guarantee. We would expect those products to be rolled out at very affordable rates, especially in the Midwest that tends to have lower loss ratios.” Others wonder whether there will be enough reinsurance coverage to satisfy what appears to be growing demand for this type of product.
Costs for hail and wind coverage have accelerated in some states/regions, and some observers wonder if the more farmer-friend ECO subsidy changes could reduce some hail and wind coverage as farmers strive to reduce costs.
Of note: A Farmdoc article out today says: “Supplemental Coverage Option (SCO) is a county-level insurance product that adds a band of coverage over the underlying COMBO crop insurance product up to an 86% coverage level. Enhanced Coverage Option (ECO) provides an additional band from 86% up to either 90% or 95% coverage again based on the county-wide outcome. This article evaluates SCO and ECO for non-irrigated corn and soybeans in the Midwest states from 2015 to 2023. If purchased each year, results show that SCO and ECO had very low payments relative to premiums, particularly for Illinois, Indiana, Iowa, Ohio, and Wisconsin. Given the loss performance, justifying the use of SCO and ECO to supplement coverage is difficult, particularly in regions with low yield variability.”
BOC cuts rates, GDP forecast... The Bank of Canada (BOC) cut its key interest rate by 25 basis points for the second month in a row, lowering it to 4.5%, and said more reductions in borrowing costs were likely if inflation continued to cool in line with forecasts.
BOC trimmed its 2024 economic growth forecast to 1.2% from the 1.5% it predicted in April, in part because households are setting aside more money to pay debts and have less to spend on discretionary items.